U.S. stocks fell sharply on Friday as August opened on renewed concerns about a weakening economy and the potential impact of new tariffs announced by U.S. President Donald Trump.
The Dow Jones Industrial Average fell 542.40 points, or 1.23%, to close at 43,588.58 – its biggest one-day drop since mid-June. The S&P 500 fell 1.60% to 6,238.01, its worst day since late May.
The Nasdaq Composite Index fell 2.24% to close at 20,650.13, its biggest one-day drop since April.
Friday's sell-off came on the heels of a disappointing U.S. jobs report for July, which showed nonfarm payrolls increasing by just 73,000, well below the 100,000 increase economists had expected.
The data for previous months also saw sharp downward revisions, with June's nonfarm payrolls revised down to 14,000 from 147,000 and May's payrolls revised down to 19,000 from 125,000. These revisions reinforced concerns that the labor market has been weak for some time.
All three major indexes posted losses for the week. The S&P 500 fell 2.4%, its worst week since late May. The Dow Jones Industrial Average fell 2.9%, marking its biggest weekly drop since early April, while the Nasdaq retreated 2.2%.
Looking ahead to this week, economic data updates are relatively light with only a few events on the calendar.
There are no noteworthy data releases on Monday, with the main focus going to Tuesday’s US ISM Services PMI report, followed by a light mid-week schedule.
Investors will also be watching comments from several Federal Reserve officials this week for any signals on future policy direction.
Another week packed with earnings reports
About two-thirds of S&P 500 companies have now reported second-quarter results, with 63% of them beating analysts’ earnings per share estimates — one of the highest beat rates in the past 25 years, according to Goldman Sachs.
Earnings growth for the quarter reached 9% year-over-year, well above the 4% growth expected at the start of the earnings season.
However, this strong performance above expectations can be misleading. Goldman Sachs strategists said that "the frequency of positive 'surprises' primarily reflects the unrealistically low bar set by expectations before the quarter begins," which also means that stocks are being "rewarded below average" for beating expectations.
This week, Disney (NYSE: DIS ), McDonald's (NYSE: MCD ) and Caterpillar (NYSE: CAT ) — all members of the Dow Jones Industrial Average — will release earnings reports that could provide further insights into the broader economy.
The strong performance could help propel the Dow Jones Industrial Average to a new high, as it currently hovers just below its December peak.
Other notable companies set to release earnings reports in the coming days include Palantir (NASDAQ: PLTR ), Pfizer (NYSE: PFE ), AMD (NASDAQ: AMD ), Snap (NYSE: SNAP ), Advanced Micro Devices (NASDAQ: SMCI ), and Uber (NYSE: UBER ).
Analysts' views on the US stock market
Evercore ISI : "When this week's 'news' about tariffs, trade, and AI (Microsoft, META (NASDAQ: META ) sharply beat earnings) hit, stocks suddenly had nowhere to run. Our base case remains for a -7% to -15% correction in the challenging September/October timeframe. What to do? Maintain a strategic exposure to a core thematic portfolio of AI Enablers, Adopters, and Adapters, focusing on AI-centric overweight sectors such as Communication Services, Consumer Discretionary, and Information Technology; further upside remains in this bull market."
Morgan Stanley (NYSE: MS ) : "We believe tariff-related inflation will be temporary and may even be deflationary/demand destroying in some sectors - namely, in the consumer sector where pricing power is difficult to achieve. Therefore, we believe the Fed will eventually transition to rate cuts. However, delaying rate cuts amid weak growth data could lead to a correction in the equity market. As discussed earlier, we are buyers of pullbacks, and Friday's decline is likely temporary."

"While there are near-term risks, our confidence in our bullish 12-month view is growing, supported by better earnings/cash flow growth.
RBC Capital Markets : "With the rally finally taking a small hit and many financial market participants (ourselves included) preparing for the summer holidays, we are revisiting our four-level fear slide, which outlines how we view a U.S. equity market correction from an S&P 500 perspective. If a conventional level 1 correction (5-10% retracement) has begun, it could put the S&P 500 index in the 5,751-6,075 range."